County settles years-old dam dispute for $23.7 mil

Maricopa County has paid out $23.7 million to settle one of the longest-running lawsuits in recent county memory.

More than a dozen landowners along the Gila River in 1995 sued then-owners of the Gillespie Dam and the Maricopa County Flood Control District over flooding on their property that occurred when the dam broke two years prior.

Heavy rains caused the Gila River to overflow and breach the dam, located southwest of Phoenix, causing water and sediment to flow south onto downstream farm land. The concrete dam was used to divert water for irrigation. The flooding caused 34 to 36 million cubic yards of sediment to settle on downstream properties, according to court records.

The lawsuit filed by farmers grew into a web of legal disputes, mainly regarding who should be held responsible for indemnity paid to the landowners and how much should be paid. The case landed in the state Supreme Court after years in the Court of Appeals. The high court denied the county's petition for review and ordered the county to pay to indemnify the farmers.

"It's a case that has gone back and forth ... It's done. It can't be appealed any further. What's exciting about it is, it's finally over," said Shelby Scharbach, assistant county manager and the county's chief financial officer.

Maricopa County has spent $7.1 million on outside counsel to litigate the case.

However, there is one final component of the dispute that may cost the county more money: the interest rate.

The court judgment imposes a 10 percent interest rate, but statutory changes since then lowered the interest rate on judgments to 4.5 percent. The interest dispute likely will be heard in Maricopa County Superior Court.

The remaining difference amounts to about $2,100 in interest accrued daily for the farmers and is worth fighting for, said Stanley Feldman, a retired Arizona Supreme Court justice representing the farmers.

"Our farmers, they've waited all these years in order to get compensation for the damage that was done to the land," Feldman said. "They're just the nicest people. They come to court all the time. The case has lasted so long they now have grandchildren."

When the $23.7 million payment was made in December, $4.6 million came from the county's self-insured risk trust fund and $19.1 million from the Flood Control District.

In the 1980s, the county Flood Control District initiated projects near the dam to clear a 1,000-foot wide channel to the dam. The district signed an indemnity agreement with the then-dam owners, under the condition that the district would pay for liability or losses that may result from the clearing projects.

In 1995, the farmers sued the dam owners and the district. They alleged the dam owners were negligent in operating the dam, and the district contributed to the dam breaching because of its clearing project.

The dam owners in 1996 sued the district separately, seeking indemnity. The district argued it did not owe indemnity because the dam breached as a result of the dam owners' negligence, not the district's projects. The district also purchased the plot it was doing clearing work on and argued the indemnity agreement did not apply after the district purchased the land.

In 2004, a jury found the district was responsible for 10 percent of the farmers' damages, and the dam owners were responsible for 80 percent, because they were negligent in maintaining the dam and caused the breach, court records show.

The district was required to pay a damage amount that was agreed to by the dam owners and farmers. The district argued that amount covered for "phantom damages," not the actual damage costs, and fought to lower the cost it owed.

Ultimately, the district was ordered to pay the larger amount, plus interest, attorneys fees and costs.

"It's unfortunate that we didn't prevail in the lawsuit or at least in the appeal on indemnity," said Tim Phillips, the district's chief engineer and general manager. "We're almost at the 20-year anniversary of when the actual flooding event occurred. It's nice to have it behind us and not having that judgment hanging over our head with uncertainty."